Astra International Second-Quarter Profit Falls on Higher Costs

PT Astra International (ASII), Indonesia’s biggest automotive retailer, said second-quarter net income fell 10 percent from a year earlier as higher costs eroded profit margins amid continued declines in commodity prices.

Net income in the three months to June 30 slipped to 4.51 trillion rupiah ($438 million) from 5.03 trillion rupiah a year earlier. Sales fell to 47.60 trillion rupiah from 49.57 trillion rupiah. The earnings were derived by subtracting first-quarter figures from first-half results which Astra announced today.

The results reflect weaker revenues from the coal and palm oil units of Indonesia’s most valuable company, at a time of increased competition. Astra’s profit is headed for its slowest growth in seven years, according to the median of analyst estimates compiled by Bloomberg.

“On the automotive side, profit margins are coming under pressure as competition forces Astra to boost promotion spending to maintain market share,” Leonardo Henry Gavaza, a Jakarta-based analyst at PT Bahana Securities, said before the earnings were announced. “Fuel prices have gone up and in a few months we will see its impact on lower car sales.”

President Susilo Bambang Yudhoyono raised subsidized fuel prices in June for the first time since 2008, leading the central bank to expect inflation to accelerate above 8 percent in July, from 5.9 percent in June. Faster gains in consumer prices may prompt Bank Indonesia to tighten liquidity, making it harder for car buyers to take up loans, Gavaza said. The central bank on July 11 raised its benchmark interest rate by a more-than-expected 50 basis points to 6.5 percent.

Astra’s selling expenses in the first half of the year rose 8 percent to 4 trillion rupiah, while general and administrative expenses rose 10 percent to 4.66 trillion rupiah, the company said in the results statement.

New Competition

Astra, which sells Toyota Motor Corp. (7203) cars and Honda Motor Co. motorcycles, must also fend off rivals including newcomer Tata Motors Ltd. (TTMT) India’s biggest automaker said on July 8 it plans to start selling cars in Indonesia in two months. Business may slow down this year, Astra’s President Director Prijono Sugiarto said on May 1.

Astra’s full-year net income will probably rise to 19.46 trillion rupiah from 19.42 trillion rupiah in 2012, the slowest growth since 2006, according to the median estimate of 24 analysts in a Bloomberg survey. The shares, which have fallen 15 percent this year, gained 2.4 percent today ahead of the results to close at 6,450 rupiah.

Indonesia’s January to June domestic automotive sales rose 12 percent from a year earlier to 601,952 units while motorcycle sales climbed 0.6 percent to 3.92 million units. About half of cars and motorcycles in Indonesia are sold by Astra.

The company also owns 59.5 percent of PT United Tractors (UNTR), the nation’s biggest heavy equipment seller, whose businesses include mining contracting and coal mining. Astra owns 79.7 percent of Indonesia’s largest publicly listed palm oil company, PT Astra Agro Lestari. (AALI) Both units reported yesterday a 25 percent drop in their first-half revenue.

Thermal coal at Australia’s Newcastle port, the benchmark grade for Asia, dropped 15 percent this year to $77.10 in the week ended July 26, according to IHS McCloskey, a provider of coal data. Palm oil futures in Kuala Lumpur have lost 11 percent this year.

To contact the reporter on this story: Berni Moestafa in Jakarta at bmoestafa@bloomberg.net

To contact the editor responsible for this story: Neil Chatterjee at nchatterjee1@bloomberg.net

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